Little Chef needs cash and a business rethink

by Tom Bill, Friday 22nd December 2006 09:00

Roadside restaurant chain Little Chef has denied reports that it is in financial trouble and seeking a rescue package from investors.

Media reports at the weekend suggested the company was "cash-strapped" and that owners Lawrence Wosskow and Simon Heath, who bought the 235-strong roadside chain for £55m in October last year, were looking to sell.

A Little Chef spokesman refuted the claim but admitted the company was in "sensitive negotiations" to bring a new investor on board owing to the ill-health of Wosskow, who had a heart attack earlier this year.

"Due to the sensitivity of the negotiations, we are unable to comment further at this time," the spokesman said.

Despite the claims, industry observers said Little Chef needed to address its business model in order to survive.

One City source said it wasn't an attractive investment opportunity. "The sale-and-leaseback model that Wosskow and Heath undertook means rents will be high and the company will be sensitive to any changes in turnover," he said. "There were a few eyebrows raised in the City when they sold the properties for all those millions and there were fears they might have over-rented the business."

Food service consultant Stephen Minall called the business model "tired" and said it needed to change course. "They rolled out a new café concept (Coffee Tempo) but didn't clean the carpets or sort the toilets out," he said. "I think they misjudged where the market had moved to and could have got big brands on board."

Little Chef in talks with US investors to avert bankcruptcy >>

Little Chef sells 65 sites >>

By Tom Bill

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